10 Myths About Filing For Bankruptcy

Many of the preconceived notions most people have about bankruptcy are simply false. Like most other things that people consider particularly frightening, bankruptcy gets a bad reputation based on half-truths. And much like other frightening ordeals, the truth is not as terrifying as previously thought. Here are 10 common myths about filing for bankruptcy:

Myth 1 – I am the only person going through this situation.

Millions of people across the United States and tens of thousands of Oklahomans file bankruptcy every year.

Myth 2 – Everyone will know that I’ve filed for bankruptcy.

When you file for bankruptcy, the court is required to send notice of your filing to all of your creditors. Afterward, your bankruptcy becomes a matter of public record, and it will be listed in your credit history. Nevertheless, individuals not involved in your bankruptcy will typically not find out about it unless you are very famous, or unless you tell them.

Myth 3 – I will lose everything by filing bankruptcy.

For most, the decision to file bankruptcy is difficult to make. To add to this difficulty, when you file bankruptcy, you may risk losing some cherished assets in the process. However, most people who file for bankruptcy keep everything and still receive a complete discharge of their unsecured debt.

Myth 4 – Filing for bankruptcy will not stop creditors from harassing me.

One of the biggest benefits of filing for bankruptcy is that during the time between the actual filing of your bankruptcy petition and your discharge, you will be protected from your creditors. You can neither be sued nor have your wages or assets garnished, and all other creditor harassment must cease.

Myth 5 – If I file for bankruptcy, my spouse has to file also.

In Oklahoma, you are not required to file for bankruptcy if your spouse has filed. If the debts that are causing your financial troubles belong to one spouse only, the indebted spouse may logically want to file individually. However, if you are jointly liable for the debts, and only one of you files for bankruptcy protection, creditors will simply seek to collect from the other spouse. In this case, it would make more sense for you both to file for bankruptcy jointly. Either way, it is your choice.

Myth 6 – Filing Chapter 7 bankruptcy will wipe out all of my debts.

Only unsecured debt will be discharged under Chapter 7 bankruptcy. In addition, certain types of debt such as child support, alimony, most student loans and most taxes will not be discharged by Chapter 7 bankruptcy.

Myth 7 – People who file for bankruptcy are deadbeats.

Most bankruptcy filings are the result of major life changes such as divorce, the loss of a long-held job or serious medical problems.

Myth 8 – I can run up my credit and then file for bankruptcy.

Even if you file for bankruptcy, you may still be held liable for any debt you incurred within 90 days of filing for bankruptcy, if it can be shown that you incurred this debt by providing false financial information or without the intent or ability to repay.

Myth 9 – After filing for bankruptcy, I will never be eligible for credit again.

After filing Chapter 7 bankruptcy, you will be more eligible for credit than before you filed. This is true because the discharge of debt you receive under Chapter 7 immediately improves your debt-to-income ratio, which is something that lenders consider heavily. As a result, you may find yourself receiving many credit offers in your mailbox. The downside is that these credit offers will carry high (sometimes extremely high) interest rates. But as long as you use this new credit as a tool for rebuilding your credit rating, rather than as everyday financial resources, you will soon be eligible for credit at more reasonable rates.

Myth 10 – Filing for bankruptcy will destroy my credit for 10 years.

Chapter 7 bankruptcy will remain on your credit report for ten years after filing, and Chapter 13 will remain for seven years. However, lenders are aware that after receiving a discharge under Chapter 7 bankruptcy, you will not be able to file again for another 8 years, which makes you much less of a credit risk. Furthermore, as time goes by, the fact that you filed for bankruptcy becomes less important than any new credit history you establish after having filed.